Money Talks, So Should You

What the rich are thinking about their investing

A Fidelity study of the wealthy in 2013 may point the way for all of us.

Brian O'Connell
by Brian O'Connell, MainStreet contributor

NEW YORK (MainStreet) — It’s not exactly a secret that the wealthy look at money differently than Main Street consumers do.

In saving, investing and wealth accumulation, the concerns of the millionaire set reveal confidence — to a point.

In Fidelity Investments' Fidelity Viewpoints — Inside/Out survey released Monday, researchers find the wealthy generally expect to make more money on their investments (mostly from U.S. stocks) but worry about higher taxes and rising inflation.

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Here are five issues from the survey worth a closer look:

The wealthy expect to get wealthier, mainly through stocks. Fidelity says that 38 percent of Americans with more than $250,000 in investable assets expect to meet standard investment benchmarks (such as the Standard & Poor’s 500 or the Dow Jones Industrial Index) this year. That’s up from 31 percent in last year. About 65 percent of high-net-worth investors say they will earn that extra income from U.S. stocks, compared with 9 percent of investors focusing on foreign stocks and 6 percent focusing on corporate bonds.

There’s a focus on midcap stocks and away from bonds and bank investments. The Fidelity study indicates wealthier Americans are turning away from bonds — bank certificates of deposit investment aren’t even mentioned in the survey. That suggests disgust with floor-scraping investment returns (the BankingMyWay Weekly CD Rate Tracker shows one-year CD rates at a paltry 0.222 percent as the report was released). It also suggests that the wealthy are confident the good times will continue to roll in the U.S. stock market, despite some sentiment that the equities market may be topping out.

Health care is a prime target of rich investor’s money. Wealthy Americans believe there is big money to make in three key industry areas — health care, energy and information technology. In the Fidelity survey, a combined 45 percent believe big bucks are to be made from those sectors.

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Wealthy Americans worry about taxes. With politicians, mostly Democrats, calling for higher taxes in state and federal legislatures, the affluent are growing anxious: 34 percent of rich Americans are concerned tax increases are coming down the pike. Another 25 percent are worried that higher capital gains taxes will eat into their income, making taxes the strongest “worry” among wealthy Americans.

Inflation is a big concern too. When it comes to their investment portfolios and bank accounts, 76 percent of Americans say they are “concerned” about inflation, which is running at 2 percent these days. The best way to beat back higher inflation is to avoid bank investment such as CDs and money market accounts, as well as public and private bond investments. Instead, 35 percent of wealthy investors surveyed by Fidelity say they will hike their equity investments, compared with 12 percent increasing their holdings in bonds and CDs.

 

Brian O’Connell has 15 years of experience covering business news and trends, particularly in the financial, health care and career management sectors. He has written 14 books and appeared on CNN, Fox News, CNBC, C-Span, Bloomberg, CBS Radio and other media outlets and in such publications as The Wall Street Journal and The Street.com. He is a former Wall Street bond trader.